Property sale / transfer / gift

rhm

Would be grateful for answers for the following situation.

Someone has approached me for advice on wanting to get rid of a property to their father.

The property was purchased in 2003 for £48,000. It is now worth approx £120,000. The property is fully paid for. Due to financial difficulties, this person wants to get rid of the property and if possible avoid paying any tax.

She originally brought the house to live in but never lived in it as she got married and lived in her husbands house in another city. For the full duration the house has been empty.

Now she wants to know which of the following options would be the best for her:

1) Her dad getting a mortgage and buying the house off her for £90,000 (£30,000 less than the market value)?

2) Her dad buying the house off her for £90,000 and paying her an £xxx every month/year, with taking out a mortgage?

3) Her transfering the property into her fathers name without any cash transactions taking place?

At this present moment she is not bothered about making or recieving money from the house as she feels it in not the best option for her to clear her debts in this way.

I would be grateful for any answers or any other solutions to this solution.

Thanks!

deanshepherd

'Get rid of' is a strange expression to use. You also say she wants to clear debts but not by selling the property. Again, strange. Why does she want to transfer the property to her father?

My initial thoughts are:

i) For CGT purposes, any transfer to a connected person (or even an unconnected person) will be deemed to have been made at market value. Therefore, she will have a capital gain based on £120k regardless of how she transfers the property.

ii) Not sure how old either party is but transferring assets upwards through the generations is usually a bad idea for IHT purposes as it may get taxed heavily on the way back down.

The first question I would ask your client is what does she want to achieve and then work out a scenario for her.

Vonni

I totally agree with Dean what a strange expression - if she has financial difficulties why isn't she using the property to pay off her committments - or is there something else she isn't telling you?

Why transfer the property to her father so far below market value, how does that help her financial situation? As Dean said it would be deemed sold at market value anyway.

Yes she could make a PET but to her father, why? This could avoid potential IHT but not CGT as again the market value would be used on disposal.

It's a real shame she didn't actually live in it, let it out and then live in it again! There could possibly have been so many more options and deductions available to her.

You really need to speak to your client to get more detailed information.

T.C.

I would talk to my solicitor on this one! Dodgy area..property.